$2 Million E&O Verdict Against Taunton Agency And Its President

On February 7, 2018, after a 13-day jury trial, a Bristol County jury found The FBInsure Insurance Agency, Inc. (“FBInsure”) and its President, Russel F. Martorana, liable to the City of Taunton for $2 million for failing to advise on adequate limits for ordinance or law coverage.

City Hall fire loss had only million dollar limit for increased building cost

FBInsure handled all the insurance business for the City of Taunton for ten years. The city’s premiums totaled over $600,000 per year. One of those buildings, the one-hundred-year-old Taunton City Hall, was placed with Axis Insurance for the policy-year 2010.

On August 17, 2010, Taunton’s City Hall was set afire by an arsonist at the start of the workday in the fourth-floor attic of the building.

Taunton City Hall after the fire awaiting reconstruction. Courtesy of Kenneth C. Zirkel.

The Taunton Fire Department quickly responded and extinguished the fire in a little more than a half-hour. However, the volume of water poured into the attic soaked the walls and ceilings of the lower three floors of City Hall. Because of the dousing the building’s internal walls received, the City decided to take down most of the walls to avoid having mold develop.

For the last seven years, the Taunton city government has been operating out of a vacant school building.

In 2017, the City decided to rebuild and upgrade the original City Hall building. The redesign and rebuilding plans total almost $26 million.

Inadequate limit for ordinance or law coverage

In 2011, the City administration settled its property claim with its insurer, Axis Insurance. The total amount of the settlement was $4,818,345.45. Not all of that sum was paid, however. Axis withheld $1,587,905.41 in code upgrade expenses, recoverable depreciation, and reimbursement of the $100,000 deductible based upon the city rebuilding City Hall within a two-year deadline.

By 2012, Axis refused to pay the City the withheld $1,587,905.4. The City itself, by this time, also had determined it was “woefully underinsured” for the losses it had suffered. The City’s insurance policy with Axis had a $1,000,000 limit for code upgrade coverage. However, the estimates the City received for the code upgrade expenses alone were more than $5,000,000.

City sues its insurance agent for negligence and its insurer for withheld payments

In August 2012, the City of Taunton sued Axis Insurance for breach of contract, FBInsure and its President, Mr. Martorana, for negligence. The complaint also contained claims under M.G.L. c. 93A for unfair and deceptive business practices.

In its complaint, the city alleged it had relied upon the expert advice and counsel of FBInsure and Mr. Martorana, who had personally handled the placement of insurance for the city’s building, to coordinate and meet the City’s complex insurance needs. As a result of this alleged negligence, the City claimed it had a lack of appropriate coverage that it claims it should have had. In particular, the City alleged that FBInsure and Mr. Martorana had failed to advise the City that for an additional premium of $5,000 per year, the limit of its law or ordinance coverage of $1 million could have been increased to the $10 million limit the City claimed it should have had to have been adequately insured.

Additional proceedings on 93A claim scheduled for February 20

Before the jury began to hear the case, Axis Insurance settled with the city for $600,000. FBInsure and Mr. Martorana went to trial and the jury found against them for $2 million of the City’s $6 million claim.

After the verdict, Mr. Martorana was quoted as saying that the agency and he were “disappointed in the verdict”, and that there would be an appeal.

In addition to the negligence claim tried to the jury, the City also had a claim for violations of M.G.L. c. 93A. Suits alleging unfair and deceptive business practices under this statute are not tried to a jury because of a Supreme Judicial Court decision.

The trial judge has scheduled this claim for a hearing on February 20, 2018.

The $2 million award will also have interest added of more than $1,315,000

The Superior Court Docket doesn’t yet reflect a judgment on the jury verdict; however, under Massachusetts law, any final judgment bears interest from the filing of the suit at twelve percent interest (12%) per annum. In the present case, the City of Taunton sued FBInsure then know as Farrell Backlund Insurance Agency, LLC, on August 16, 2012. Based on that date, the $2 million award will have more than $1,315,000 added to it for prejudgment interest. Any unsuccessful appeal bears twelve percent interest on the total of the verdict and the prejudgment interest.

[update April 16, 2018: on March 28, 2018, final judgment on the jury verdict entered against the agency and its president in the amount $3,349,273.45, including interest and costs].

About FBInsure

FBInsure can trace its roots back to 1858, employs a staff of 85 insurance professionals in eight locations: Taunton, Rehoboth, Dighton, Middleboro, East Freetown, Attleboro, North Attleboro and New Bedford. It boasts a client base of over 20,000 personal and commercial clients and is designated as a Five-Star Agency by the Massachusetts Association of Insurance Agents.

About Owen Gallagher

Owen Gallagher is an experienced insurance litigator as well as a certified mediator and arbitrator who specializes in insurance industry disputes. His interest and affinity for insurance began at a young age working the counter at his father’s assigned risk agency in Roxbury. Over the course of his career, Owen has argued a number of cases in the Massachusetts Supreme Judicial Court and has helped agents, insurance companies, and lawmakers alike with the complexities and idiosyncrasies of insurance law in the Commonwealth. Owen can be reached here.

Leave A Comment or Question

Maybe now more agents will realize most property policies provide “replacement cost” coverage with values based on “reconstruction cost” estimating using current building codes but policies don’t provide 100% Building Ordinance coverage so there’s a huge coverage gap. The insurance industry is profiting off the disconnect between replacement cost, reconstruction cost and increased cost of construction due to building ordinances. Over the years, a few of us have commented on this site about this issue in the past. I’m sorry the agent got sued but hope this case will make agents realize this is one of the most important issues in the industry at this time. Agents, with or without MAIA, should work together to lobby the Division of Insurance to solve this coverage issue or more agents will face this kind of legal action.

Article Comments & Updates

Aaron Smith It was a great convention. Really learned a lot, loved it. Had a good time. Aug 09, 3:26 PM

Jane Logan, CPCU The Named Storm deductible was supposed to be effective 8/1/18, policies are still renewing with a Windstorm and Hail deductible-I've contacted the Attorney General and MPIUA. The last time MPIUA missed a deadline it was the change from policies expiring unless paid to renewing automatically-they... Aug 08, 1:40 PM

Paul &Ellen Caron My wife and I have had coverage thru Mapfre insurance for quite some time and never used it, now we have a small mold problem and we have the coverage but our representative Ashley Reece informs us that we are not covered because of some... Aug 01, 10:56 AM

Jane Logan,CPCU The amount of revenue the MA DOI generates versus it's annual budget gives new meaning to the term law of large numbers... It's absolutely outrageous that the DOI spends so little on regulating the industry - all to the detriment of insurance consumers. Jul 31, 8:02 AM